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CERAMIC·BATHROOM April 18-21,2018

Press

 

Malaysia, an Industry in Focus

Time:2017.09.21  Views:

As the industry’s eyes turn to ASEAN this month with the biennial occurrence of the region’s premier ceramics meeting, ASEAN Ceramics, we take a look at how one of the less well-supported countries in terms of traditional ceramics is continuing to make its mark.

 

Malaysia is continuing its nearly stable growth in production, consumption, exports and imports, as well as in trading with partners in the ASEAN bloc. All of its ceramic sectors are growing since past several years, but, it is not always smooth. It accompanies ups and downs like other regional countries. Its ceramic products, especially, tiles are facing stiff competition from other ASEAN countries, as well as from the non-ASEAN, particularly, from China, as local production cost is rising continuously making exports expensive.

 

The industry people are still apprehending the continued domestic slowdown and lower return from exports may affect the industry. “Domestic consumption remains unfavourable to tile manufacturers,” said Malaysian ceramic tile manufacturer Kim Hin Group’s managing director John Chua.

 

After years of slower demand for the domestic tiles and increasing market share by the Chinese products, the tile manufacturers are now active in expansion of exports and domestic catering through partnership approach with other ceramic manufacturers and housing developers. To boost up demand for tiles in the domestic markets the tile makers are reaching understanding with the developers and buildings of building projects, while in the export markets they are looking for collaboration with the manufacturers in the local and export markets.

 

The local manufacturers have been negotiating with major developers like Malaysian ceramic tile manufacturer Seacera Tiles Berhad’s group organization, Seacera Group, for jointly developing township and properties in over 500 acres. Seacera hinted at reaching major deals by the third quarter of this year with the interested and participating tile manufacturers. The joint venture development with Seacera alone would involve some 10 billion Malaysian ringgits over a period of some 15 years beginning from 2019, according Seacera Group’s Corporate Finance and Business Development Manager Mohamad Suffian Ismail, as reported by the Media.

 

On the other hand, the Malaysian tile manufacturers collaborating with local and foreign manufacturers to recover the lost and declining markets. Malaysian ceramic’s number one export market Australia is already in the card of some of the major manufacturers-exporters like Kuching based Kim Hin Industry Berhad/Kimgres.

 

The Kim Him Group, which produces and markets ceramic tiles under the Kimgress and Durogres brands, apprehends the property market this year will pick up slowly causing continuation of present slower demand in the domestic markets despite a little brighter outlook for steady growth of the expansion of the economic growth of Malaysia. The existing challenges in the domestic and export markets due to slowdown is still continuing badly, according to Kim Hin chief John Chua.

Kim Hin is already involved in tile imports and exports as well as distribution as it owns several up and downstream operations in Australia, China and some other countries, as well as in Malaysia.

 

The company has investment interests abroad in support of its tiles business domestically and internationally. It has acquired Australia-based Outset Holdings Pty Ltd, which operates a chain of franchised units and the company-owned retail outlets specializing in tiles and paving products, for reportedly A$6.37 million. This has strengthened the group’s presence in Australia, according to the company.

 

It said its recent acquisition of a renowned retail chain will enhance its distribution channels, given the competitive nature of imports coming into Australia. Outset Holdings is the holding company for Amber Group Australia Pty Ltd, which operates a network of 24 franchised stores and three company-owned stores in Australia.

 

Kin Hin is also the holding company for Norcorp Pty Ltd, a construction material wholesaler. Prior to the acquisition, Kim Hin was importing ceramic tiles from overseas suppliers as well as its own manufacturing plants in Malaysia and Shanghai, China, for the Australian market. It has also in 2014 acquired Norcros Industry Pty Ltd, which imports and distributes Johnson tiles, according to the media.

 

The company sadi when the Malaysian domestic property market remains weak, its overseas operations are flourishing. The export market contributed 42 percent to the Kim Hin Group’s net profit and 44% to its revenue in financial year 2016. Its major overseas markets are China, Australia and Vietnam, with China being the largest profit contributor.

 

Cost friendly

Malaysian government is going to remove energy subsidy. This will increase production cost and competitiveness in the world export markets as well as in the domestic markets. According to emphasis of the 11th Malaysia Plan 2015-2020, the manufacturers will be restructured to remain competitive, while they are being encouraged to increase productivity through automation and innovation.

 

FMM MCIG said, Malaysia’s introduction of Construction Industry Development Board (CIDB) Act 520 (Amended) 2011 will regulate imported and local construction materials. Construction materials shall comply with Malaysian Standards or other International Standards.

 

Increasing energy prices is now a barrier mostly to the major user tile and sanitaryware factories. The biggest challenge for the Malaysian ceramic tile manufacturers is the continued rise in gas prices by 28% last year, said Guocera.

 

The tile company said it has embarked on several energy conservation and heat recovery projects to maintain its cost competitiveness as gas prices are expected to continue increasing. While the domestic market is expected to remain challenging, product segments will continue to strategically increase the market share in the domestic market through new products innovation and stronger distribution network.

 

The primary focus is there to increase its export sales through a stronger global brand presence, improved distribution and a product portfolio which is tailored to meet the needs of the target markets. Exports are expected to contribute a higher proportion of Guocera’s sales in the coming years, said the manor tile manufacturer.

 

Some other manufacturers suggest, there already appears some good news. Malaysian porcelain tile manufacturers, Malaysian Mosaics Berhad (MMB), which has a reputation in the market for its MML brand, and the White Horse Ceramic Industries Sdn Bhd that has good regional influence, said their production costs are middle class consumer friendly.

 

   

Malaysian ceramic performance

Product

Production

Import

Export

Domestic Market

Unit

Tile

72

34

29

77

million sqm

Sanitary ware

3.2

1.3

1.6

2.9

pcs

 

 

MMB (MML) and White Horse have been continuously upgrading their porcelain tile production units by investing on energy conservation technology to reduce consumption of energy per square metre of porcelain tiles.

 

Malaysia is one of the best quality porcelain tile manufacturers in Asia. It is the only tile manufacturing country in the region where the consumers look for quality only as the market is already matured like those of Japan, South Korea and Taiwan. Cheaper energy was once lucrative to the manufacturers, but now the government is gradually raising the prices of gas, electricity and petroleum, although, it is still competitive with Indonesia in terms convenient access to energy.

 

At a production cost of US$5 or more per sqm of porcelain tiles in Malaysia, energy accounts for 25-30%. The share of raw materials is about 25%. Wages and salaries are too high in the country, compared to other tile manufacturing countries under the ASEAN bloc. Wages and salaries account for about 35%, while others 10-15%. Because of its favorable production cost and support from the domestic markets, Malaysia is a reputed exporter of quality porcelain tiles.

 

But the exports are not as easy as one can think on simple reason when it comes to pricing. Export is expensive, while import is much cheaper. Malaysia has world class production competitiveness, yet the domestic market is being lost to the alien products substantially.

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